Recruitment News and Views

Zero Hour Contracts

A record high has been reached in the number of people working zero contract hours. New figures from the Office for National Statistics reveal that 105,000 more people were on zero contracts (ones which do not guarantee work) in 2016 compared to 2015. This is an increase of almost 14% and is 30% higher than in 2014.

However, although the figures in 2016 show a record high, they also revealed a sharp slowing in the rate of increase in the last six months of 2016.

“It’s notable that the increase of 0.8% in the second half of 2016 compares to a 7.7% rise over the same period in 2015,” said Conor D’Arcy, policy analyst at the Resolution Foundation, which undertook the analysis of the ONS’s Labour Force Survey. “Ever since ZHCs hit the headlines the numbers have increased sharply every six months. The latest figures bring this run to an end.”

The decline in the rate of increase for such contacts – which have been criticised for being forced on lower paid workers – could be down to three reasons.

Firstly, as the levels of employment reach a record high, people looking for work can be more demanding about the type of contracts they sign. The number of people on zero hour contracts rose rapidly after the financial crisis as employers sought to cut their costs and be more flexible and employees were more concerned about losing their jobs.

Secondly, as the UK approaches full employment, the number of new jobs being created whether they’re full time or zero hours is slowing down.

Lastly, business reputation seems to have an effect. Controversies over zero hour contracts at companies such as Sports Direct, have stopped other businesses from using them. Homebase scrapped zero hour contracts earlier this year, whilst JD Wetherspoon has offered staff on zero hour contracts a chance to move onto contracts which guarantee hours.

Although zero hour contracts have been controversial, many say they provide flexibility to people such as students, parents and those with other caring responsibilities. The employee – who still receives employment rights such as annual leave – does not have to accept work offered.

“We shouldn’t dismiss all ZHCs as exploitative,” Mr D’Arcy said. “Over the past year, approaching half of the increase has been among workers aged 55-64. For many of these workers, ZHCs could offer a flexible transition from full-time work to retirement, allowing them to top up their incomes. Neither are they all low-paid positions: one in six ZHC workers are in the three highest-paying occupation groups.”

However, the government are concerned that “precarious” working is undermining the tax base as people on zero hour contracts are generally less well paid and more reliant on in-work benefits. The government is likely to make the issue of zero hour contracts and the gig economy – where people take on “self-employed” work for companies like Uber – a key issue in the Budget next week. Both have been blamed for undermining the way the present tax system works. The Treasury is likely to announce further steps towards “balancing” the amount of tax paid by the self-employed and those on short term or zero hour contracts, so that they pay similar levels of tax to those in full-time, guaranteed employment.

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